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5 Cards in this Set
- Front
- Back
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What causes market entry? How does market entry effect market prices and quantities? How does market entry effect total profits?
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If there are economic profits to be made in a market, more firms will enter it. When they do this will cause the supply curve to shift to the right, in turn causing the market price to drop and will reduce the output and profits of a firm.
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What causes market exit? How does market exit effect market prices and quantities? How does market exit effect total profits?
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Market exit happens when a resource runs scarce or when there are no more profits to be made by a firm. When this happens the supply curve shifts to the left. Causing the market prices to raise and will increase the output and profits of a firm.
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Explain long run price decision under perfect competition.
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If the price equals the actual cost then the firm breaks even and the industry maintains its capacity, but there are no economic profits because market cost equals price and will eventually cause a market exit.
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How do competitive firms maintain profits over the long-run?
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1. Improve product(s)
2. Reduce Production cost 3. Update technology |
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What are benefits of competition to society?
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1. Competitive Prices
2. Improved product quality 3. Expands Markets 4. Markets work best under competition. |
